Creating a DSO can also add to the complexity of employee benefits. By definition, you have more than one legal entity (and probably more than one employer). Therefore, it will be important to think about issues such as the provision of social and health benefits, pension schemes and non-discrimination testing/ERISA, as well as affiliated service groups and controlled group analyses. Step 4- Finalize the DSO structure and related agreements: Once we have adapted each of these agreements to your specific needs and structures, we will complete them and send them to you for signature. Practices may also take into account the non-proprietary DSO structure. Non-captive DSO contracts provide certain non-clinical administrative support services in exchange for 3% to 6% of gross revenues as a management fee. Like strategic partnership programs, equipment, leasing, intellectual property and non-clinical staff remain in practice, and the non-proprietary DSO model generally offers a more limited range of non-clinical services and support. Second, a practice may require separate legal entities to be practised in different States. It can be tedious (or unacceptable) to practice beyond state borders.

Different states may have very different laws on employee employment, decisions regarding clinical practice, insurance requirements, payment environments, and a whole host of other issues. In this situation, it may make sense to have separate legal entities for practices. This can be more easily achieved and scaled into multiple states with a DSO model. Finally, moving from a single practice structure to a DSO structure may limit flexibility in structuring a sale or acquisition. Especially when creating a DSO, parties can inadvertently cause tax or health problems, especially when it comes to concepts such as Subchapter S elections, recovery of depreciation, triggering taxes on embedded profits, concerns about the anti-bribery law, and countless other issues. There is more than one way to design a DSO. Sometimes dentists are employees of the DSO. In the case of other DSOs, dentists retain ownership of their practice and enter into a commercial services contract with the DSO. But all DSOs are structured to ensure professional oversight and accountability of the company. Think of a DSO as the ongoing support that maintains the commercial side of a dental practice while the dentist is engaged in clinical care.

A DSO or dental practice sale usually takes the form of an asset purchase or a share purchase. The agreed structure is primarily determined by the corporate practice of dental considerations and the economic and fiscal objectives of the parties. Under the purchasing group model, there is a contractual purchasing relationship between members` practices. The purchasing group structure uses the collective bargaining power of a group of people to obtain quantitative discounts on products and services for profitable practices. By combining multiple practices, operators can maintain complete commercial autonomy and receive awards for products and services similar to those offered at large dental practices. Additional structural complexity is associated with costs. While it`s relatively simple to operate from a single professional unit as a dental practice, managing a DSO with one level (or even multiple levels) of management and submanagement can cause headaches. Investors, management and clinicians need to be made aware of the vagaries of a somewhat esoteric legal structure. All dental practices must comply with regulations and have a business structure that has invested in regulatory compliance.

This can often be difficult for small practices, especially if they plan to expand beyond state borders. A DSO can alleviate some of the stress of having different laws in all the different states when the dental practice is trying to have separate practices across the country. Brian A. Colao is the Director of Dykema`s Dental Services Industry Group. He is widely regarded as one of the leading authorities in the United States with respect to DSO formation, DSO business structures, DSO-related mergers and acquisitions, as well as regulatory compliance for DSOs. As mentioned above, the DSO and THE MSA must be structured in such a way as to correspond to the practice of corporate dentistry of the respective state. As a general rule, a dental practice can only be owned by one licensed dentist. Therefore, non-dental investors can only own the DSO, and their primary commitment to the dental practice industry is through the MSA. Over the past decade, the dental industry has evolved and consolidated.

Individual and group practices are joining dental service organizations (DSOs) at record speed. Non-dental investors purchase non-clinical assets such as dental equipment, leases and intellectual property, and contractually bind dental practices into a conventional DSO structure. In a traditional DSO structure, the DSO typically owns the dental equipment and intellectual property, holds the leases, and employs all non-clinical staff in the contracted practices. First, many multi-site dental practices want to provide equity or a stock-like economy to executives, which can be difficult (or impossible) in a single dental practice in a tax-efficient and legally compliant manner.